Reporting a Required Minimum Distribution to Charity on Your Tax Return
Up to $100,000 a year of your RMD is tax-free if you transfer it to charity, but be sure you report it correctly on your return to avoid a tax bill.
I read your column about giving your IRA's required minimum distribution to charity, and I have a few follow-up questions. How do I report the distribution on my 1040? Will I get a 1099-R showing that it wasn’t taxable? Also, can I give the RMD from my 401(k) to charity?
If you are 70½ or older, you can transfer up to $100,000 from your IRA to charity tax-free, which counts as your required minimum distribution but isn't added to your adjusted gross income. You cannot make a tax-free transfer from your 401(k) to charity, but you can roll over money from your 401(k) to an IRA and then transfer the RMD to charity. (If you're 70½ or older, you'll have to take your RMD from your 401(k) before you can roll over the balance.)
Report the distribution on line 15a of your Form 1040 as a gross distribution. On line 15b, write $0 for the taxable amount (if you have no other taxable distribution). Be sure to add "QCD" (for qualified charitable distribution) next to that line to explain why the distribution is tax-free, says Jeff Levine, chief retirement strategist for IRA consulting firm Ed Slott & Co.
You'll receive Form 1099-R reporting the distribution, but the form does not specify that it was a tax-free transfer to charity. If you work with a tax preparer, it's important to let him or her know that it was a qualified charitable distribution so you don't end up paying taxes on the amount. Now that the law permitting tax-free transfers to charity has been extended permanently, Levine says he hopes the IRS will add a code to 1099-Rs specifying that the distribution was a QCD.
For more information about the tax reporting for qualified charitable distributions, see the IRS's IRA FAQs -- Distributions (Withdrawals).